This blog was written by our Head of Analysis and Insights, Tom Quinn.
On 31st July, the Department for Energy Security and Net Zero announced that the budget for AR6 CfD auction was being increased from £1 billion to £1.5 billion.
| Pot | Technology | Original budget | Uplifted budget | Increase in capacity (at ASP) |
| 1 | Onshore wind, solar etc | £120m | £185m | Not modelled |
| 2* | Floating wind, tidal stream, geothermal etc. | £105m | £270m | 234 MW** |
| 3 | Offshore wind | £800m | £1,100m | 1,159 MW |
* Tidal stream has a ringfence of £15m, increased from £10m. ** Made up of 227MW of floating wind, 7MW tidal.
The decision to significantly raise these budgets is both welcome and necessary to support the sector on the path to achieving 2030 targets of 60GW of offshore wind, and 5GW of floating wind specifically.
If the entire budget is used with projects bidding at the maximum strike price (ASP), then we could see 4.2GW of bottom fixed wind, 362MW of floating wind, and 20MW of tidal stream projects securing CfDs. An important caveat though is that history tells us that the capacities of projects to progress don’t always add up to these theoretical maximums.
The impact of this announcement will only be fully known when we see what price developers bid at. Bidding lower means it takes more capacity to “use up” the budget. In the most likely scenario, this will result in 1.1 to 1.5GW more offshore wind, 200-250MW more floating wind and around 7MW of tidal stream.
There is over 10GW of offshore/floating wind eligible to bid into AR6, so we are likely to see heated competition in the auction. This will be a welcome change from AR5, which attracted no bids for offshore wind. The announcements to increase the administrative (maximum) strike price in March 2024, and this increase in budget should result in multiple GWs awarded. However, this still leaves the sector playing catch-up to meet targets.
The following charts highlight the difference this announcement has made to the potential capacity which can clear.
